When its existing vendor handling retiree medical benefits administration exited the business in 1999, Sears, Roebuck and Co. chose human resources provider Hewitt Associates to take over the work. Trust grew over the years, and Hewitt now handles all health and group benefits administration for Sears’ 180,000 eligible active and retired participants.

Hewitt won the outsourcing contract in a competitive bid process. It was the HR firm’s services offering, flexibility, and cultural fit that “carried the day for them,” says Michael Olund, Sears Manager, Benefits Administration. Olund, who has worked in HR benefits positions for 20 years, says the services have proved to be superior.

Olund states, particularly, that communications between the parties in this relationship are outstanding, compared to all the other outsourcing situations in which he has been involved. “The difference here is that both sides are working together. You can’t just hand off work to a services provider and walk away from it.”

Indeed, both companies rank communications and commitment to mutual goals as the top two keys to their success. This is also the foundation for their ability to adapt to change quickly and to innovate in order to achieve the desired objectives.

Success didn’t happen overnight. It began with their commitment to mutual goals, which spurred them to put in place the “Exchange Program” and the “Stanley Cup” — two innovative ideas designed to ensure effective communication and value outcomes.

The Exchange Program

Prior to outsourcing benefits functions to Hewitt, the Sears service center in Atlanta, Georgia handled payroll and benefits calls. Once Hewitt was in the picture, Sears associates dialed one phone number and then were routed through the “phone tree” options either to Atlanta (dial “1” for payroll) or to Hewitt in Lincolnshire, Illinois (dial “2” for benefits). Unfamiliar with the Hewitt folks but accustomed to the Sears crew, associates were dialing “1” and asking an Atlanta service center representative to contact Hewitt and find out the benefits information for them. Moreover, confusion existed where it was not intuitive to associates whether they should push “1” or “2” for questions about “medical deductions,” for example (since “medical” implies “benefits” and “deductions” implies “payroll.”) Both service centers were getting each other’s calls.

As Olund recalls, they “had a big powwow between the two teams on how to make it work.” Subsequently, they innovated and developed the Exchange Program. “Some of the Hewitt folks from Lincolnshire came down and spent two days in Atlanta sitting with the customer service reps who handle payroll, and some of the folks from Atlanta went to Lincolnshire and sat with the Hewitt reps,” he says. That way, each group came to understand how calls come in, what the Sears associates were being told, and how they were being bounced back and forth between Atlanta and Lincolnshire.

The two centers then stopped transferring Sears’ associates to each other’s center. Instead, they started doing “warm transfers,” with the Atlanta payroll person staying on the line until the Hewitt benefits person was also on the line, or the Hewitt person staying on the line until the Atlanta payroll person was also on the line. Once both customer center people were on the phone with the Sears associate and all three fully understood what the issue was, they determined where it belonged.

Communication between the two service centers increased tremendously because of the Exchange Program. Now, Olund says “Hewitt looks to Atlanta if there is anything coming down the pike that might impact call volumes — the dental plan sending wrong ID cards, for instance. In such an instance, Hewitt would call Atlanta and say, ‘You shouldn’t get these calls, but here’s what’s happening in case you do.'”

The Stanley Cup

Sears has been extremely proactive in working with the Hewitt customer service team to ensure the representatives are consistently providing accurate and friendly customer service. One instance resulted in an innovative win-win situation.

The Sears / Hewitt relationship’s Stanley Cup award is named after Stanley Aldis, on Olund’s team at Sears. Stanley visits Hewitt’s Lincolnshire service center once a month to “listen to the reps, educate them about Sears, and work on the escalated workflows for matters that are outside the normal parameters of policies and procedures for Sears. But Stanley helps them over and above what is on the written page,” says Olund.

Stanley’s help empowered the Hewitt reps in answering questions better. Getting to know the Sears internal world better through Stanley’s visits, the Hewitt team decided that there were some things that they could do to streamline Hewitt administration and processes for the Sears account. They approached Sears about an incentive program for process improvements. Three of the Hewitt teams now compete each month, and managers vote on the winning idea. The suggested improvements must be measurable. Besides the Stanley Cup award itself, Sears gives gift certificates quarterly to accompany the award.

“The Stanley Cup is a great example of both sides working together to come up with a solution that benefits everyone,” Olund states. Hewitt also recognizes the value outcomes produced from this innovative idea, and the Sears customer service team has become a model for other Hewitt account teams within its Lincolnshire location.

Managing for Results

“Every company doesn’t fit easily into an outsourcing provider’s box,” says Olund. “Sears is a 118-year-old company, and we knew that we had more than our fair share of peculiarities, grandfathered plans, and complexities.” In the provider selection process, Sears sought a company that would be willing to work with Sears where Sears differed from a standard model. “We chose Hewitt for its flexibility and ability to understand Sears and then work with us to create something that we could live with.”

This means, also, that Hewitt has been willing to waive some fees for out-of-scope requests and for work that is “a left turn from its normal highway.” Both companies recognize that outsourcing’s real benefits are mutually obtainable only in a long-term relationship. Both believe their successful relationship is due to the level of commitment on both sides.

“Regardless of what the issue is, both parties have the Sears associates’ best interests at heart,” reports Olund. “So it’s not a matter of ‘you didn’t do that,’ or ‘you did that,’ or ‘how much is this going to cost?’ In the end, it’s truly about ‘how we can get to a point that is going to best serve both companies?’ This is one of the few relationships I’ve worked in over the years where this has been exhibited so obviously and so bountifully by both parties.”

Lessons from the Outsourcing Journal:

Outsourcing’s benefits are meant to be achieved in a long-term relationship. Thus, both parties must be committed to adapt to change and to implement what it takes to achieve their mutual goals.

Effective communications — open and proactive — are a key to success in outsourcing relationships. In addition to formal plans for how the parties are to communicate over the long term, many benefits can be reaped from implementing programs that draw the two companies’ employees together to better understand each other’s culture and ways of operating.

Incentive programs are often successfully used in outsourcing to spur creative ideas on improving processes. Such programs work even better when the financial reward sifts down to the grass-roots level to motivate the people actually doing the work.